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Should there be a node failure or hardware failure, vpslink would have a backup of my xen domU to implement on a separate server. From there, if I'm doing an rsync of my site files and nightly database dumps, I could update my application on this new server. Does this sound correct?

That is correct - you would be able to bring your VPS back to its state by restoring your last database dump and rsync'ing differentials acquired over prior days.

Originally Posted by v1nce

However, this brings up the question of where these vpslink dom0/domU backups are stored. Are these offsite or onsite? In the unlikely event of a facility problem, onsite backups may not be available?

We do not operate from multiple datacenters at this time, however, our present datacenter is designed to withstand disasters and is monitored 24/7 by security personnel.

Just wondering, what kind of natural disasters affect the Tukwila and Seattle area?
I did a little research a while back, before I signed up and found out Spry/VPSLink is colocated(?) at the Fortress Colocation Centers, which is at Integrate West. They definitely appear to have all the normal and backup equipment needed to properly run a DC.

Just wondering, what kind of natural disasters affect the Tukwila and Seattle area?

The Puget Sound and the Olympic Peninsula provide significant protection from hurricanes, tsunamis, and flooding in general, however, the area does have a potential for seismic activity (the possibility of an earthquake was taken into consideration - the datacenter is reinforced to withstand an earthquake).